CTP® Practice Quiz

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CTP® Practice Quiz - 3

This question is based on the following data describing a company's actual deposits.; Day 1: $95; Day 2: $100; Day 3: $85; Day 4: $85; Day 5: $85; Day 6: $110; Day 7: $125.; If a five-day moving average is used, what was the deposit forecast for day six? *

1 point

$75

$85

$90

$110

Company XYZ is now required to make electronic payments by its suppliers. To prevent an increase in costs, the company should *

1 point

Negotiate a change in payment timing with its suppliers.

Institute a just-in-time inventory system.

Negotiate a change in cash disbursement with its concentration bank.

Institute a modified RSA system for its inventory.

The time between the payor's mailing of a check and the payee's receipt of usable funds is known as: *

1 point

collection float.

mail float.

processing float.

availability float.

What must be measured and monitored to ensure that a company has adequate liquidity? *

1 point

Net receivables

Stock price

Short-term borrowing obligations

Net working capital

A large U.S. company is planning to fund its Canadian subsidiary. Currently, the Canadian dollar is trading at CAD 1.25 per U.S. dollar, and the U.S. dollar is expected to depreciate in the near term. To manage this FX exposure, what technique should the company implement? *

1 point

Leading

Re-invoicing

Lagging

Multicurrency accounts

Which of the following are commonly used for financing accounts receivable?; I. Factoring; II. Issuing credit cards; III. Revolving bank loans; IV. Letters of credit *

1 point

I and II only

I and III only

III and IV only

I, II, and III only

EML Inc., which has $600 million in outstanding debt, is preparing to issue commercial paper in excess of $100 million within the next six months. The new assistant treasurer has recently spent time getting to know the issuing and paying agent, the rating agency analyst, and the legal counsel, and has been following the financial markets. What is this is an example of? *

1 point

Benchmarking with peers

External collaboration

Decentralized control

Risk transfer

A company may choose to use a derivative to reduce risk on which of the following types of exposure?; I. Currency; II. Interest rate; III. Commodity price *

1 point

I and II only

I and III only

II and III only

I, II, and III

Company A regularly modifies its capital structure by repurchasing stock. Which one of the following is a true statement? *

1 point

Investors may feel that management is manipulating the stock price.

Stock repurchases are not an attractive alternative to dividend payments.

Partial disclosure to the SEC is required for repurchases.

Stock repurchases do not offer tax deferral advantages over dividends.

Which of the following is a common method for assigning float on a check deposited to a non-US bank account? *

1 point

Proof of deposit

Company sample

Value dating

Fractional availability

A real estate development company has excess cash that it would like to invest in one of its properties: Property A has shown an ROI of 40%, a residual income of $25,675, and an EVA of $32,678.; Property B has shown an ROI of 45%, a residual income of $27,635, and an EVA of $29,523.; Property C has shown an ROI of 55%, a residual income of $22,658, and an EVA of $30,678.; Property D has shown an ROI of 52%, a residual income of $19,675, and an EVA of $31,523.; In which property should the company invest? *

1 point

Property A

Property B

Property C

Property D

An analyst at XYZ United is in charge of setting up the bank accounts. Fraud is a major concern due to the analyst's past experience with previous employers. The analyst has estimated that the company will earn 3.7% on surplus cash. Surplus cash must be invested in short-term investment grade investments. The company's closest competitor earned 4.1% for its surplus cash in its latest fiscal year. What bank service should the analyst use to maximize the company's surplus cash? *

1 point

Payable Through Draft

Reverse Positive Pay

Zero Balance Account

Controlled Disbursement

An airline wants to lock in the price of the jet fuel it needs to purchase to satisfy the peak in season demand for travel. The airline wants to manage its exposure to fluctuations in fuel prices. What type of exposure is this? *

1 point

Translation

Delivery

Commodity

Speculative

A treasurer overhears several employees talking about selling their company stock before a pending deal impacts the stock negatively. What action should the treasurer take to control this behavior in the future? *

1 point

Report the employees to the SEC.

Provide training on ethics and code of conduct.

Contact the investor relations department.

Contact the internal and external auditors.

When company profits are high, what is the MOST LIKELY way management will prefer to finance growth? *

1 point

By borrowing funds

By retaining earnings

By investing in current assets

By issuing stock

A buyer receives an invoice from a supplier that offers discount terms of 3/10, net 60. What is the effective cost of discount? *

1 point

15.64%

16.13%

21.90%

22.58%

A prearranged ACH payment normally includes which of the following?; I. A fixed payment amount; II. A provision for immediate availability; III. A predetermined payment date *

1 point

I and II

I and III

II and III

I, II and III

A large multinational company recently implemented new processes to automate its treasury operations. If these changes were the direct result of comparing the company's practices with those of other companies, the activities could be considered an example of which of the following?; I. Liquidating; II. Re-engineering; III. Benchmarking; IV. Forecasting *

1 point

I and III only

II and III only

I, II, and III only

I, II, and IV only

The Treasurer of a company would like to establish an investment policy for the organization. One objective that should be included in the investment policy that would BEST allow the organization to limit its exposure to a particular market sector would be to: *

1 point

perform a risk analysis.

develop an exposure horizon.

establish ratings requirements.

set diversification requirements.

Use the financial statement for XYZ Company in the exhibit to answer this question. What is the cash flow from operating activities for the current year?; Current Year: (CY); Prior Year: (PY); Cash: (CY) $2,000,000; (PY) $1,500,000; Short-Term Investments: (CY) 1,800,000; (PY) 2,000,000; Accounts Receivable: (CY) 2,200,000; (PY) 1,800,000; Inventory: (CY) 3,100,000; (PY) 2,600,000; Net Property; Plant & Equipment: (CY) 8,000,000; (PY) 7,300,000; Accounts Payable: (CY) 2,100,000; (PY) 1,700,000; Short-Term Debt: (CY) 2,300,000; (PY) 1,800,000; Long-Term Debt: (CY) 4,400,000; (PY) 4,000,000; Total Equity: (CY) 8,300,000; (PY) 7,700,000; Net Income: (CY) 800,000; (PY) 750,000; Dividends Paid: (CY) 200,000; (PY) 150,000; Depreciation & Amortization: (CY) 400,000; (PY) 350,000 *

1 point

$(700,000)

$700,000

$900,000

$1,700,000

An inverted yield curve occurs when which of the following is true? *

1 point

As rates on current issues rise, the price of existing issues falls.

In anticipation of lower long-term rates, investors push short-term rates down.

The longer the maturity of the investment, the greater the risk of a price decline.

The longer the maturity of the investment, the lower the rate of return.

Which of the following is a component of a company's operating budget? *

1 point

Shareholders equity

Accounts receivable

Long-term debt

Capital investments

Which of the following would be expected to happen on the ex-dividend date? *

1 point

The stock is sold with the dividend attached.

The stock price drops.

The stock’s volume increases.

The stock’s dividend is paid.

In which of the following instances does the clientele effect come into play? *

1 point

When a company announces its earnings forecast

When a company submits its 10-Q to the SEC

When a company declares a dividend

When a company increases its sales

PTC Corporation has determined that the threshold amount for initiating a wire transfer vs. an ACH payment for concentrating funds is $60,225. Wires cost $9.00 and save one day of float. If the opportunity cost is 5%, what is the cost of the ACH payment? *

1 point

$0.75

$0.80

$0.90

$1.00

Components of a field banking system include which of the following?; I. Local bank; II. Concentration bank; III. Lockbox bank *

1 point

I only

I and II only

II and III only

I, II, and III

As a result of the Sarbanes-Oxley Act, what new entity was established to sanction firms and individuals for audit violations? *

1 point

The Sarbanes-Oxley Review and Assessment Board

The Accounting Controls Advisory Board

The Public Company Accounting Oversight Board

The Auditing Review Board

Which of the following is NOT a short-term cash forecasting technique? *

1 point

Income statement forecast

Distribution forecast

Receipts and disbursements forecast

Accounts receivable balance pattern forecast

Which of the following is true of return on investment (ROI)? *

1 point

It includes a charge for the cost of capital in a project.

It is commonly used to calculate after-tax profitability.

It may cause management to accept a project with positive NPV.

It is calculated as profit per dollar of invested capital.

When using the Internet to access auction markets, companies may use certificate authorities to reduce their exposure to which of the following types of risk? *

1 point

Credit

Valuation

Counterparty

Foreign exchange

Company XYZ is a high technology company. It is planning on acquiring another company in the high technology sector. Company XYZ does not have enough cash to acquire the company and is planning on financing the acquisition through a bond offering. Which of the following measures is company XYZ MOST LIKELY to use in its analysis of operating profits considering it is a high debt transaction? *

1 point

Long-term debt to capital

EBITDA margin

Net profit margin

Return on equity

Which of the following is responsible for examining national banks? *

1 point

The Federal Reserve

The Federal Deposit Insurance Corporation

The Office of the Comptroller of the Currency

The Securities and Exchange Commission

The process by which a bank or insurance company guarantees the debt obligation of a borrower is referred to as credit: *

1 point

enhancement

rating

scoring

options

A treasurer is monitoring the yield curve through a service provider (like Reuters) and notices that it is moving from downward sloping to upward sloping. Based on this information, the treasurer should consider: *

1 point

a commercial paper program

a short-term borrowing facility

interest rate collars

a variable rate long term facility

There are 31 calendar days in the month, and the opportunity cost of funds is 9%. (Day - Calendar Days of Float); Batch #1: 3 Days, $2,000,000; Batch #2: 4 Days, $3,500,000; Batch #3: 5 Days, $1,500,000; What is the annual cost of float for the batches listed? *

1 point

$78,387.09

$78,532.25

$79,838.71

$82,499.99

Which of the following can be considered key responsibilities of daily cash management?; I. Overseeing compensation for bank services; II. Management of short-term borrowing and investing; III. Projecting future cash shortages and surpluses *

1 point

I only

I and II only

II and III only

I, II, and III

A multinational company may use which of the following to locate profits in subsidiaries in low-tax countries? *

1 point

Dividends

Transfer pricing

Management fees

Intracompany loans

A company purchases a machine tool with an expected life of 3 years. Under the accrual accounting method, the equipment would be treated in which of the following ways? *

1 point

As an asset, recorded on the balance sheet at acquisition cost and depreciated

As an asset, recorded on the balance sheet at purchase price and amortized

As a purchase, netted against retained earnings

As a purchase, recorded as an operating expense in the current period

An employer wishing to reduce operating income volatility would MOST LIKELY offer what type of retirement option to its employees? *

1 point

Defined contribution plan

Defined benefit plan

Retirement bonus plan

Cash balance plan

Which of the following MOST often contributes to the misinterpretation of DSO? *

1 point

Varying fiscal year-ends

Sales patterns

Size of the payment discount

Weekends and holidays

Company XYZ sends an ACH debit file valued at $300,000 with an average item value of $1,000. The file settlement date is March 10. The file contains no duplicate items and items are split equally between corporate and consumer items. One percent of consumer items and 2% of corporate items were returned. What would be the final net settlement value for Company XYZ? *

1 point

$291,000

$295,500

$297,000

$298,500

BEA Company has determined its breakeven dollar amount for concentrating remote funds is $550. BEA Company has a daily earnings rate of 6% and gains one day of accelerated funds. If a wire costs BEA $35.00 dollars, what is the cost of an electronic funds transfer for BEA Company? *

1 point

$1.00

$2.00

$3.00

$4.00

All of the following are advantages of using traditional financial ratios for analysis EXCEPT: *

1 point

they can easily be computed from the information found in publicly available financial reports.

they usually reflect accounting rather than economic values.

they can be used to view historical trends and availability over time.

they allow comparisons to be made between like companies.

The treasurer of a corporation is negotiating with one of his/her suppliers to allow the corporation to have 30 days to pay the supplier's invoices. The treasurer is arranging: *

1 point

short-term financing.

revolving credit agreement.

factoring of receivables.

uncommitted line of credit.

A company with a relatively poor credit rating borrows most of its funds with short maturities. They may want to change its exposure to interest rates to more correctly reflect the long-term nature of the projects it is funding. Or, they may believe that long-term interest rates are going to rise, causing it to seek protection against the impact of higher interest rates on its balance sheet. Which of the following would be a solution? *

1 point

Forward contract

Interest rate swap

Currency option

Futures contract

A company agrees to pay ¥10,000,000 for a shipment from Japan. At the time the purchase order is placed the exchange rate is ¥168/US$. At the time of payment the exchange rate is ¥163/US$. What is the net effect on the dollar cost of the shipment if the transaction has NOT been hedged? *

1 point

An increase of $5,000

An increase of $1,825

A decrease of $5,000

A decrease of $1,825

A nationwide retailer has been making EFT payments to its suppliers for several years. It will expand its processes to include consumer payments in its EFT initiative. Which of the following will support this initiative at the point-of-sale? *

1 point

Check truncation

Consumer-to-business

Paid-on-production

Prearranged payment

A regional physicians' group is looking for an alternative to liability insurance to help protect against potential future liability claims. Which method would BEST serve its need to protect against catastrophic losses? *

1 point

Casualty insurance

A risk retention group

Non-insurance

Self-insurance

Which of the following will exempt commercial paper from SEC registration?; I. A maturity of fewer than 270 days; II. A rating grade of A-1 or P-1; III. Distribution through a licensed dealer; IV. Backing by a U.S. bank letter of credit *

1 point

I only

IV only

I and II only

II, III, and IV only

A call option for a company has an exercise price of $50. The stock is currently trading at $60. At maturity, what should an investor who paid $3 for the option do? *

1 point

Exercise the option and gain $7.

Exercise the option and gain $10.

Not exercise the option and lose $3.

Not exercise the option and lose $13.

A treasury manager at a multinational manufacturing corporation assigned a team of analysts to re-engineer the company's FX exposure management program. Which of the following alternatives would BEST accomplish this objective? *

1 point

Leading and lagging

Re-invoicing

Transfer pricing

Value dating

An international company would establish a re-invoicing center for which of the following reasons? *

1 point

To reduce its international balance reporting charges

To manage the foreign exchange exposure of its foreign subsidiaries

To take advantage of interest-bearing demand deposits

To bring transaction exposures more closely in line with economic exposures

All of the following are differences between Fedwire and ACH EXCEPT: *

1 point

ACH per item transaction costs are less.

ACH transactions have delayed settlement.

ACH transactions involve more consumer payments.

ACH items have no credit risk.

Company ABC, with a current debt rating of BBB- from Standard & Poor's, is negotiating a new revolving credit agreement with its lenders. The company anticipates closing on a small acquisition within a year of executing this new agreement and would like maximum flexibility to determine its capital structure. The company is MOST concerned about the lenders' inclusion of a *

1 point

ratings trigger.

growth rate covenant.

change in control covenant.

limit on internal financing.

Which of the following is a common approach to negotiating EDI payment terms versus paper payment terms? *

1 point

Offering lower discounts for electronic payments than for paper payments

Offering payment terms that are float-neutral for both payment formats

Making the electronic payments due earlier than paper payments

Having the same due date for electronic and paper payments

What is the PRIMARY issue that management needs to consider when determining capital structure? *

1 point

Maintaining control of ownership

Complying to rating agency and lender restrictions

Using common stock as a source of funds

Determining the mix of debt versus equity

A company plans to issue additional equity within the next 12 months but needs to issue debt at a low interest rate now. Which of the following instruments would BEST meet this objective? *

1 point

Convertible bonds

Private placement issue

Preferred stock

Subordinated debentures

When evaluating a FSP during the RFP process, a company should place a high value on a FSPs financial strength when the provider: *

1 point

is located in a remote location.

holds assets for the company.

processes high dollar value transactions.

processes international transactions.

Future treasury operations will be affected MOST significantly by consolidation of which of the following? *

1 point

Competitors

Subsidiaries

Commercial banking industry

Procurement cards

The Treasury Manager is forecasting sales based on historical data. It was observed that sales decreased sharply in December last year, normally a high sales volume period. Further investigation indicated that a severe winter storm was experienced across the Southeastern United States. How should this event be classified in the forecast when considering the sales trends? *

1 point

Random movement

Stationary series

Cyclical pattern

Seasonal pattern

XYZ Corporation uses ABC Bank for their lending and treasury management. In addition, the bank serves as bond trustee for XYZ Corp. If XYZ Corp. becomes distressed, this relationship could create a conflict of interest for the financial institution. What barrier prevents a financial institution from sharing confidential information between divisions? *

1 point

Chinese wall

Counterparty risk

Non-disclosure agreement

Sarbanes-Oxley controls

What is the present value of an investment with an interest rate of 6% that pays $300 in three years? *

1 point

$283.02

$267.00

$251.89

$237.63

A cash manager's recommendation to use procurement cards as a way to reduce accounts payable expense is an example of: *

1 point

benchmarking.

outsourcing.

re-engineering.

re-invoicing.

A treasury employee of Company XYZ is privy to financial reporting information yet to be released to the public. He knows that year-end earnings exceed last year's and would be viewed as positive to the investment community. He casually mentions to a relative that now would be a good time to buy the stock of Company XYZ. Which section of the treasury code of ethics would typically be violated by such a disclosure? *

1 point

Employee conduct

External activities

Conflict of interest

Confidential information

Which of the following cash concentration transfers is MOST LIKELY to result in a bank ledger overdraft? *

1 point

A wire transfer of prior day's balances

A DTC of current day's lockbox deposits

An ACH transfer of anticipated deposits

An ACH transfer of one-day available funds

The Treasury Manager of a chain of department stores wants to develop a medium-term forecast. Management plans to open two new stores, and anticipates same-store sales to increase by 15%. Which of the following items can be predicted with the highest degree of certainty? *

1 point

Taxes on stock options

New product sales

Fixed bond interest payment

Refranchising proceeds

Recently LEW Utilities, a local utility company, began using the company processing center method to process customer payments. Prior to this change, it used its local depository bank's lockbox to process the payments. The PRIMARY advantage of the new method is to: *

1 point

decrease mail float as a result of applying payments in-house.

ensure that payments are correctly applied to the customer's account.

reduce the processing float since payments are mailed directly to the customer.

lower overall costs since in-house processing is cheaper than third-party processing.

True statements about the open account method of trade payment include which of the following?; I. A bank guarantees payment.; II. It is the most common type of trade credit.; III. A periodic credit review of each customer is required.; IV. The customer makes equal monthly payments. *

1 point

II only

I and IV only

II and III only

I, III, and IV only

The Cash Manager of ABC Logistics, Inc. sets a daily cash position by noon. All departments have been given an 11 a.m. cut-off for presenting wire requests and 2 p.m. for ACH requests. A wire request came in at 3:30 p.m. to make an insurance premium payment, in order to receive a discount. What liquidity reserve requirement is impacted? *

1 point

Regulatory

Transaction

Opportunistic

Precautionary

Which of the following actions would the CFO of a Canadian multinational conglomerate MOST LIKELY take to repatriate profits from its international subsidiaries? *

1 point

Re-invoicing

Multilateral netting

Unbundle cash flows

Pooling

Company XYZ is not sure which direction interest rates are headed. Which of the following would be MOST suitable? *

1 point

An interest rate cap

An interest rate floor

An interest rate swap

An interest rate collar

The term "collection float" is defined as the delay between the time the payor: *

1 point

prepares the check and the payee deposits the check.

mails the check and the payee deposits the check.

mails the check and the check is charged to the payor's account.

mails the check and the payee receives the available funds.

An intern was hired by the Vice President of Accounts Payables to process the electronic payments that come through the bank. The intern is responsible for manually entering payee information into the system at each step of the process. The VP directed the intern to enter the information as fast as possible without mistakes to optimize the number of transactions that could be processed. Instead of manually entering information the VP should have utilized: *

1 point

large value transfer system.

straight-through processing.

continuous linked settlement.

enterprise resource planning system.

Which of the following is excluded from the computation of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)? *

1 point

Revenues

Dividends

Cost of Goods Sold

Operating Expenses

Company ABC has a concentrated investor base consisting primarily of large institutional shareholders. It would like to increase its number of smaller shareholders using the most cost effective method of raising capital available. What should Company ABC do to accomplish this goal? *

1 point

Issue preferred stock.

Implement a dividend reinvestment plan.

Issue warrants.

Implement a stock repurchase plan.

A company is looking to improve its collection rate of returned checks. If the company implements re-presented check entry (RCK) with its bank, it might see a reduction in what type of returned items? *

1 point

Consumer payments less than $2,500

Corporate payments less than $2,500

Consumer payments more than $2,500

Corporate payments more than $2,500

The auditors of a private college are examining and auditing the college's financial statements. The statements are not presented in accordance with GAAP. What should the auditors do? *

1 point

Issue a standard unqualified opinion.

Not render an opinion.

Base their opinion on GASB standards.

Issue an adverse opinion.

When estimating the cost of capital, which of the following financial resources would probably NOT be included in the cost of capital calculation? *

1 point

Common stock

Long-term debt

Preferred stock

Short-term debt

If a bank has a 10% reserve requirement, a 31-day month, and an earnings credit rate of 6.5%, which of the following is the approximate level of collected balances required to support $1.00 worth of bank service charges? *

1 point

$181

$199

$201

$206

A large retailer is preparing to accept credit cards and anticipates monthly credit card sales of $1,000,000. If the terms with the acquiring bank include bundled allocated fees of 6% and the retailer wishes to delay fee payment as long as possible, what should the retailer do? *

1 point

Accept gross settlement.

Place a hold on consumer credit limits.

Receive net settlement.

Delay funds transfer to card-issuing banks.

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